The Government of Andhra Pradesh has recently on 25th March 2025 (available here) (“Notification”) exempted IT companies from complying with certain provisions of the Andhra Pradesh Shops and Establishment Act, 1988 (“Shops and Establishment Act”) for a period of 5 years.
The exemptions are applicable to IT companies engaged in the business process outsourcing services provided mainly with the assistance or use of information technology, such as: (a) back office operations; (b) call centres or contact centre services; (c) data processing and data mining; (d) insurance claim processing; (e) legal databases; (f) creation and maintenance of medical transcription excluding medical advice; (g) translation services; (h) payroll; (i) remote maintenance; (j) revenue accounting; (k) support centres; (l) website services; (m) data search integration and analysis; (n) remote education excluding education content development; or (o) clinical database management services excluding clinical trials, but does not include any research and development services whether or not in the nature of contract research and development services.
A few key exemptions granted to the IT companies by the government are as follows:
- Flexible opening and closing hours for business.
- Women employees have been permitted to work during night shifts subject to meeting certain conditions (see Schedule 1 below).
- Permits termination of employees (having at least 6 months of continuous service) without notice or wages in lieu thereof and exemption from making retrenchment payments to such employees; and
- Maintaining statutory registers in soft copies, with digital records being considered sufficient for compliance instead of physical form.
These exemptions in our view appear to provide greater flexibility to the IT companies to: (a) fix work shifts; and (b) hire and fire certain classes of employees (mostly employees in supervisory roles or in managerial positions) without any notice requirement or payment of retrenchment benefits.
To the extent the Notification does not appear to exempt compliance with central legislations such as the Industrial Disputes Act, 1947 (“IDA”), the IT companies will still be required to comply with these legislations, such as provisions relating to retrenchment of employees (other than supervisors and managers).
Please refer to the table in Schedule 1 for a more detailed analysis of the exemptions.
Schedule 1: Analysis on Exemptions
| Exempted Provisions | Conditions and Observations |
|---|---|
| Section 15: Prescribes hours of opening and closing of establishment. | Observation: This exemption allows IT companies to fix work hours to cater to foreign clients. |
| Section 16: Prescribes daily (8 hours) and weekly working (62) hours for employees. | Conditions: Weekly working hours fixed at 48 hours. Employees are entitled to overtime wages for work above this. Observation: This will provide greater flexibility to IT companies to structure work shifts of their employees (such as more work hours on a busy day). |
| Section 23: Not permitted to make woman employees work in any establishment after 8:30 p.m. and before 6:00 a.m. | Conditions: Adequate security and to-and-from-transport services from residence to be provided. Obtain details of drivers such as driving license, photographs, address, telephone number/mobile number, biodata etc. Pre-employment screening of the antecedents of all drivers. Determine schedule and route of pick and drop every Monday. Any change permitted with prior knowledge of supervisory officers/employees. Careful selection of routes to prevent women employees who are picked up first are dropped last. Desirable to provide security guards for night shift vehicles. Establish a control room or travel desk for GPS-based vehicle movement monitoring. Register all vehicles on VAHAN app. Women employees need to download the police department’s security mobile app. List of hired vehicles to be shared with police department. Observation: The exemption provides a greater flexibility to IT companies to structure their shifts (such as hire women employees for night shifts). |
| Section 31: Every employee entitled to 9 days of paid leave in a year on days of national importance/festivals. | Conditions: Compensatory holiday in lieu of notified mandatory national and festival holidays. Further, every employee entitled to weekly off. Observation: Indian arm of foreign companies can now align their holiday calendar in India with their global holiday calendar. For example, employees can be given a holiday on 4 July instead of 15 August. |
| Section 47: Employers cannot terminate employees without a reasonable cause or a 1 month notice or wages in lieu. Termination must be communicated in writing with a copy of communication sent to the inspector within 3 days. Employees are also entitled to retrenchment wages on termination. | Observation: Allow hiring and firing of senior employees (such as supervisors and managers). Compliance under IDA for other employees continues to apply. |
| Rule 29: Requires employers to maintain statutory registers in hard copies. | Condition: Employers are required to maintain registers in soft copy. Observation: Eases compliance requirements for IT companies. |
This update is for information purposes only. For further information, please reach out to us at contact@appartners.in